VOYAGEUR MUTUAL FUNDS III INC /MN/, N-30D, 1999-06-29

VOYAGEUR MUTUAL FUNDS III INC /MN/
N-30D, 1999-06-29

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<PAGE>

Aggressive Growth Fund
Growth Stock Fund

(various photos demonstrating service and guidance, professional management and
goals)

service and guidance

professional management

goals
1999
Annual Report

DELAWARE
INVESTMENTS
=====================
Philadelphia o London
<PAGE>

commitment

growth of
capital

tradition

A TRADITION OF SOUND INVESTING

Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions - including some of America's largest pension funds reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also manage
investments for variable annuities and closed-end funds as well as offer a wide
range of retirement plan services for individuals and businesses.
Delaware Investments manages approximately $45 billion in mutual fund assets
and institutional advisory accounts for more than half-a-million investors.

Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<PAGE>

A Commitment
To Our Investors

(photo of computer keyboard)

(photo of illustration from Growth of Capital Brochure)

Fund Objectives

Aggressive Growth Fund
Seeks long-term capital appreciation.

Growth Stock Fund
Seeks long-term capital appreciation through investments in equity securities
diversified among individual companies and industries.

Table of Contents

Letter to Shareholders Page 1
Portfolio Manager Reviews Page 3
Aggressive Growth Fund Page 3
Growth Stock Fund Page 6
Performance Summary Page 9
Statements of Net Assets Page 11
Financial Highlights Page 15
<PAGE>

June 18, 1999
growth of
capital

Dear Shareholder:

As we concluded fiscal 1999 on April 30, the Dow Jones Industrial Average was
just days away from crossing the 11,000 mark for the first time in the history
of the U.S. stock market. Only one month earlier, the Dow broke 10,000 for the
first time. The stock market moved steadily higher amid continued strength in
the U.S. economy, now in its ninth consecutive year of expansion.
Just three months into our fiscal year last July, many investors questioned
the nation's ability to sustain economic growth as financial crises swept
through Russia, Latin America and the Pacific Rim. As U.S. corporate profits
also slowed, both domestic and foreign investors fled riskier investments in
stocks and non-government bonds for the safety of U.S. Treasuries.
During this uncertain period from mid-July through the end of September, the
average stock in the unmanaged large-company Standard & Poor's 500 Index lost
19% of its value. The Federal Reserve Board responded by lowering its target for
short-term interest rates, which helped bolster investor confidence and stock
prices in late 1998.
During the first few months of 1999, the S&P 500 was led by a narrow group of
large company growth stocks. The demand for rapid earnings and revenue growth
caused investors to focus almost exclusively on stocks of larger companies. This
bias took a toll on the stock performance of small and mid-size companies.
We are pleased to report that Aggressive Growth Fund, which invests in
companies of all sizes, had a total return of 28.43% for the 12 months ended
April 30, 1999 (for Class A shares at net asset value with distributions
reinvested). Aggressive Growth Fund outperformed the S&P 500 and comparable
growth funds, as shown below.

THE STOCK MARKET MOVED STEADILY HIGHER AMID CONTINUED STRENGTH IN THE U.S.
ECONOMY, NOW IN ITS NINTH CONSECUTIVE YEAR OF EXPANSION.

ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------
12 Months Ended
April 30, 1999
- -------------------------------------------------------------------------
Aggressive Growth Fund A Class +28.43%
Growth Stock Fund A Class + 9.56%
- -------------------------------------------------------------------------
Lipper Growth Fund Average (1035 funds) +15.05%
Standard & Poor's 500 Index +21.83%
- -------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of distributions. For complete performance for
all Classes, see pages 9 and 10. The S&P 500 is a commonly used index of mostly
large company stocks. You cannot invest directly in an index. Past performance
does not guarantee future results.
<PAGE>

for growth
of capital

We attribute Aggressive Growth Fund's superior performance to strong stock
selection in the technology, consumer and financial services industries.
Growth Stock Fund had a total return of +9.56% for the period (for Class A
shares at net asset value with distributions reinvested), less than half that of
the S&P 500. The Fund had a relatively small allocation in technology companies
compared to the S&P 500. Considering that technology provided roughly half of
the Index's return during our fiscal year, our smaller allocation to this sector
was a primary reason for Growth Stock Fund's underperformance.
On the pages that follow, Aggressive Growth Fund's lead portfolio manager,
Gerald S. Frey, and Growth Stock Fund's portfolio manager, James King, review
their investment selection processes and discuss some of the individual
investments that impacted Fund performance in fiscal 1999. They also share their
outlook for U.S. equities in the coming year.
With many opportunities still ahead, we look forward to working with you to
make the most of your mutual fund investments. Your future awaits and we're
committed to helping you get there in the new millennium.

Sincerely,

/s/ Wayne A. Stork
- --------------------------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds

/s/ David K. Downes
- --------------------------------------
David K. Downes
President and Chief Executive Officer,
Delaware Investments Family of Funds

overview
<PAGE>

for growth
of capital

Portfolio Manager Reviews

Aggressive Growth Fund

Gerald S. Frey
Senior Portfolio Manager
May 15, 1999

Aggressive Growth Fund's results for fiscal 1999 were extremely strong. Though
the Fund declined 10.61% amid market turbulence in the first six months of the
period, the Fund recovered its losses nearly three-fold during the second fiscal
half to finish with a 28.43% return. (Class A shares with distributions
reinvested and without the effect of the sales charge.)
As we mentioned in the Fund's semi-annual report, Aggressive Growth Fund's
performance is closely tied to short-term changes in investor sentiment about
earnings and growth prospects for stocks in the portfolio. In the first half of
our fiscal year, that effect was negative. But improving investor sentiment in
late 1998 and early 1999 had a positive impact on the performance of many Fund
holdings.
Technology, about 22% of the portfolio at fiscal year-end, was our best
performing stock group through the end of April. Stocks with strong returns
included America Online Inc., one of the largest internet service providers, and
Gemstar Development Corporation, a developer of programming systems such as "VCR
Plus" and "TV Guide Plus" used to enhance television viewing.
Our investment in FORE Systems, Inc., a leading global supplier of high
performance Internet switching equipment, also boosted Fund performance. FORE
Systems was recently acquired by General Electric Company, plc, (GEC) of Europe.

aggressive
growth
fund

AGGRESSIVE GROWTH FUND'S STOCK SELECTION PROCESS
----------------------------------------------------

All Market Capitalizations

High and Consistent or Accelerating Earnings Growth Rates

Industry Special
Specific Situations
Dynamics

Aggressive Growth
Fund Portfolio

Aggressive Growth Fund's management evaluates companies of all sizes and selects
only those stocks it believes have the greatest potential for high or
accelerating earnings growth.
<PAGE>

for growth
of capital

In addition to our technology holdings, Aggressive Growth Fund also benefited
from the solid performance of individual issues in the consumer and financial
services industries including Outback Steakhouse, a popular restaurant chain,
and Capital One Financial Corporation, one of the world's largest issuers of
credit cards.
Avoiding health care stocks worked in our favor. Many investors soured on
health care stocks during fiscal 1999 due to negative feelings surrounding
Medicare reform.
When we select stocks for the portfolio, we look for companies whose earnings
growth rates appear to be accelerating or consistently high. During the past 12
months, we sold several stocks that no longer met these criteria, including
Advanced Fibre Communications and Pacific Gateway Exchange, both
telecommunications services companies, and Oracle Corporation, a large software
company. All three companies had earnings shortfalls that caused us to remove
them from the portfolio.

AGGRESSIVE GROWTH FUND'S HOLDINGS
BY MARKET CAPITALIZATION
- -----------------------------------------------------------------------
AS OF APRIL 30, 1999

Company Percentage of
Market Capitalization Portfolio Assets
- -----------------------------------------------------------------------
Under $1 billion 8.3%
$1 billion - $5 billion 43.1%
$5 billion - $10 billion 9.2%
$10 billion and over 39.4%

AGGRESSIVE GROWTH FUND PERFORMANCE SURPASSES PEERS
AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
Lipper Growth Fund
Aggressive Growth Fund S&P 500 Category (1035 Funds)
<S> <C> <C> <C>
1 Year 28.43% 21.83% 15.05%
3 Years 38.51% 29.07% 21.53%
Lifetime May 16, 1994 - April 30, 1999 30.11% 26.95% 21.13%
</TABLE>

Source: Lipper Analytical. The performance shown above includes the reinvestment
of distributions, but does not include the effect of sales charges. Past
performance is not a guarantee of future results. Return and share value
fluctuate so that shares when redeemed may be worth more or less than the
original investment. Performance for other share classes will differ due to
varying charges and expenses. Complete performance for all classes can be found
on page 9.

<PAGE>

for growth
of capital

AGGRESSIVE GROWTH FUND
SECTOR ALLOCATION AND PORTFOLIO HIGHLIGHTS
APRIL 30, 1999

Aggressive S&P 500
Growth Fund Index
- -------------------------------------------------------------------------
Median Market
Capitalization $4.2 billion $8.3 billion
Number of Stocks 58 500
Average Stock Price-to
Earnings Ratio 29.9x 25.46x
Top Sector Technology Technology
Beta* 1.53 1.0
- -------------------------------------------------------------------------
P/Es are based on analysts' forward earnings estimates.
* A measure of risk relative to the S&P 500 Index. A number less than 1.0
means less historical price volatility than the Index. A number higher
than 1.0 means more historical volatility. Thus a 1.53 beta means the
Fund's historical volatility has been 53% higher than the Index.

Technology 21.7%
Financials 19.6%
Retailing 12.4%
Electronics & Electrical Equipment 7.9%
Cable/Media 8.2%
Leisure/Lodging 6.3%
Basic Industry 2.7%
Telecommunications 3.1%
Consumer Products 3.5%
Other 3.5%
Cash 11.1%

OUTLOOK
During fiscal 1999, a combination of low interest rates, low inflation and a
growing U.S. economy provided a near-perfect environment for U.S. companies to
increase earnings. We believe that in fiscal 2000 a rebounding international
marketplace will add to this favorable environment, helping high quality stocks
to perform well.
The caveat to this positive environment is that investors continue to put
pressure on large companies to meet or beat earnings estimates. We believe the
biggest fundamental problem facing the equity market today is earnings
shortfalls by individual companies. As we saw last year, earnings
disappointments can dramatically alter investors' perceptions of the market.
As always, we seek companies that we believe can perform well over time,
regardless of economic conditions. Our focus on companies with strong growth
prospects across all market capitalizations provides added diversification. We
believe this can help the Fund offset unexpected downturns in any particular
industries or companies of a specific size, and allow the Fund to tap into
growth trends across all sectors and market capitalizations.

outlook
<PAGE>

for growth
of capital

Growth Stock Fund

JAMES KING
Voyageur Asset Management, LLC
Senior Portfolio Manager
May 15, 1999

Growth Stock Fund had a positive total return of +9.56% for the 12 months ended
April 30, 1999. Though this performance is in line with average stock returns
over the history of the market, the Fund underperformed the S&P 500 Index and
the Lipper Growth Fund Average during fiscal 1999.
We believe there are two primary reasons for this:

o The first reason is that our investment discipline steered us away from owning
technology stocks, the best performing stock group during fiscal 1999.
o The second is that once we choose stocks for the portfolio, we have
approximately the same allocation to each stock. This is very different than
the S&P 500 which bases allocation on market capitalization (company asset
size). Our allocation method did not work to our advantage during the past 12
months as we explain below.

STOCK SELECTION BASED ON
DEMONSTRATED RESULTS
Our stock selection process is based on demonstrated, rather than anticipated,
results. We look for stocks with these characteristics:

o High quality ratings (A+ or A) by Standard & Poor's;
o Consistency of long-term earnings growth and dividend increases (measured over
a 10-year period);
o Low stock prices relative to earnings.

growth
stock fund

GROWTH STOCK FUND
TOP 10 HOLDINGS
- ------------------------------------------------------------------------------
APRIL 30, 1999

Security Market Value % of Net Assets S&P Rating
- ------------------------------------------------------------------------------
Shell Transport and Trading $2,680,812 5.03% A-
Royal Dutch Petroleum $2,640,937 4.96% A-
Hewlett-Packard $2,366,250 4.44% A
Sigma-Aldrich $2,344,500 4.40% A+
Anheuser Busch $2,266,875 4.25% A
Sherwin-Williams $2,241,000 4.21% A+
Grainger (W.W.) $2,208,250 4.14% A
Illinois Tool Works $2,156,000 4.05% A+
Automatic Data Processing $2,136,000 4.01% A+
Sysco $2,078,125 3.90% A+
<PAGE>

for growth
of capital

Of the 6,000 publicly traded companies in the U.S., only about 245 companies
qualify for an A or A+ rating from Standard & Poor's. Companies with ratings of
A+ and A have historically been the most consistent at expanding their profits.
From that quality universe, we narrow our selection to roughly 30 stocks based
on the second and third selection characteristics listed on page 6.
The Fund's sector allocation, shown below, is a by-product of this investment
process. We typically have larger weightings in consumer staples industries such
as food, beverage and tobacco because companies in these sectors have
traditionally increased their dividends and earnings more consistently. These
companies tend to be defensive in a declining market.
Because the majority of technology companies do not meet S&P's criteria to be
rated A or A+, most technology stocks have not met our selection guidelines for
the Growth Stock Fund portfolio. Our low exposure in this sector hurt our
performance in fiscal 1999; technology stocks accounted for almost half the S&P
500's return.

EQUAL WEIGHTING FOR
LONG-TERM RETURN
Equal weighting simply means that we place approximately the same emphasis on
each stock in the portfolio. In Growth Stock Fund, we would allocate
approximately the same percentage of the Fund's portfolio to a $5 billion
company as to a $100 billion company. In the S&P 500, the $100 billion company
would have a much larger allocation and thus greater impact on the Index's
return than the $5 billion company. Much of the S&P 500's return has depended on
the substantial weighting of a select number of very large companies.

long-term
return

GROWTH STOCK FUND
SECTOR ALLOCATION AND PORTFOLIO HIGHLIGHTS
- ------------------------------------------------------------------------------
APRIL 30, 1999
Growth S&P 500
Stock Fund Index
- ------------------------------------------------------------------------------
Median Market
Capitalization $19.5 billion $8.3 billion
Number of Stocks 24 500
Average Stock Price-to
Earnings Ratio 23.5x 25.5x
Top Sector Food, Beverage
& Tobacco Technology
Beta* 0.75 1.00
- ------------------------------------------------------------------------------
P/Es are based on analysts' forward earnings estimates.
* A measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the Index. A number higher than 1.0
means more historical volatility. Thus a 0.75 beta means the Fund's historical
volatility has been 25% lower than the Index.

Food, Beverage & Tobacco 19.3%
Retailing 10.9%
Energy 10.0%
Health Care and Pharmaceuticals 9.2%
Technology 8.5%
Packaging and Containers 7.9%
Financial 7.5%
Basic Industry 4.4%
Industrial Machinery 4.1%
Auto Parts 3.5%
Electronics 3.4%
Cable/Media 3.5%
Cash 7.8%
<PAGE>

for growth
of capital

Why do we weight our holdings equally? Research shows that over the last 40
years, equal weighting has outperformed capitalization-based weighting 58% of
the time. (Source: The Leuthold Group). We believe these results will hold true
over the long term in spite of recent trends where the largest companies have
had the most price appreciation.

PORTFOLIO POSITIONING
AND OUTLOOK
During the past 12 months, we sold several long-term holdings including Sara
Lee, whose earnings quality was downgraded from an A+ to B+ by S&P, and
therefore no longer met our selection standards. We also sold Home Depot and
Electronic Data Systems (EDS), both of which we thought were overvalued.
We purchased the stocks of two technology companies that met our criteria for
consistent earnings and dividend growth: Automatic Data, a company that produces
payrolls for large corporations, and Intel, a leader in the personal computing
industry. Both companies represent about 4% of net assets and are currently
rated A+ and A, respectively.
Typically, our turnover is very low - less than 20%, on average, over the
past five years. But recently we've had more activity due to volatility in the
stock market. During fiscal 1999, our portfolio turnover rate was 36% as we
reduced the number of portfolio holdings from 30 stocks to 24 stocks because
there was a lack of companies that we thought were selling at reasonable prices
relative to their earnings.
We believe the U.S. economy is very strong. Corporate profit levels, which
have increased somewhat in 1999, also appear attractive to us. We will continue
to seek companies with strong earnings histories and a solid long-term outlook
based on a demonstrated ability to deliver consistent results.

outlook
<PAGE>

for growth
of capital

Performance Summary

AGGRESSIVE GROWTH FUND PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
- ------------------------------------------------------------
MAY 16, 1994 TO APRIL 30, 1999
Includes 5.75% front-end sales charge

Lipper Growth Fund
S&P 500 Composite Average (399 funds)
May '94 $10,000 $10,000
Jun. '94 $ 9,755 $ 9,663
Sep. '94 $10,232 $10,192
Dec. '94 $10,230 $10,053
Mar. '95 $11,226 $10,808
Jun. '95 $12,298 $11,867
Sep. '95 $13,275 $12,908
Dec. '95 $14,075 $13,218
Mar. '96 $14,830 $13,935
Jun. '96 $15,496 $14,555
Sep. '96 $15,975 $14,996
Dec. '96 $17,306 $15,828
Mar. '97 $17,770 $15,719
Jun. '97 $20,872 $18,210
Sep. '97 $22,436 $20,112
Dec. '97 $23,080 $19,916
Mar. '98 $26,299 $22,515
Jun. '98 $27,168 $22,961
Sep. '98 $24,465 $19,886
Dec. '98 $29,675 $24,470
Mar. '99 $31,158 $25,534
Apr. '99 $32,364 $26,165

Aggressive Growth Fund Class A
May '94 $ 9,425
Aug. '94 $ 9,725
Nov. '94 $ 9,516
Feb. '95 $ 9,383
May '95 $10,152
Aug. '95 $11,643
Nov. '95 $12,089
Feb. '96 $12,149
May '96 $14,315
Aug. '96 $12,911
Nov. '96 $15,522
Feb. '97 $14,557
May '97 $16,301
Aug. '97 $19,950
Nov. '97 $22,208
Feb. '98 $24,219
May '98 $24,700
Aug. '98 $20,971
Nov. '98 $26,316
Feb. '99 $30,031
Apr. '99 $34,381

Chart assumes $10,000 invested on May 16, 1994, a 5.75% front-end sales charge
and reinvestment of all distributions. Performance for other Fund classes will
vary due to differing charges and expenses. Effective November 2, 1998, the
maximum sales charge was raised from 4.75% to 5.75% for investments less than
$50,000. Past performance does not guarantee future results. Lipper Growth Fund
Average does not include sale charges.
<PAGE>

AGGRESSIVE GROWTH FUND PERFORMANCE
- --------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1999

Lifetime One Year
- --------------------------------------------------------------------
Class A (Est. 5/16/94)
Excluding Sales Charge +29.62% +28.43%
Including Sales Charge +28.08% +21.08%
- --------------------------------------------------------------------
Class B (Est. 4/16/96)
Excluding Sales Charge +40.74% +27.41%
Including Sales Charge +40.25% +22.41%
- --------------------------------------------------------------------
Class C (Est. 5/20/94)
Excluding Sales Charge +28.70% +27.45%
Including Sales Charge +28.70% +26.45%

Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charge assumes either that contingent deferred sales
charges did not apply or the investment was not redeemed. Past performance is
not a guarantee of future results.

Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a contingent deferred
sales charge of up to 5% if redeemed before the end of the sixth year. Class C
shares have no front-end sales charge and a 1% annual distribution and service
fee. If redeemed within 12 months, a 1% contingent deferred sales charge
applies.

Expense limitations were in effect for all classes for the periods shown above.
Performance would have been lower if the limitations were not in effect.

The average annual total return for the lifetime period and the annual return
for the one-year period for Aggressive Growth Fund's Institutional Class (Est.
8/29/97), which is available without sales or asset-based distribution charges
only to certain eligible institutional accounts, were 29.76% and 28.73%,
respectively.
<PAGE>

for growth
of capital

GROWTH STOCK FUND PERFORMANCE
- --------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
10 YEARS ENDED APRIL 30, 1999

Growth Stock Fund Class A S & P 500 Index
Apr. '89 $ 9,425 $10,000
Apr. '90 $10,790 $11,055
Apr. '91 $11,996 $13,003
Apr. '92 $14,858 $14,828
Apr. '93 $15,071 $16,197
Apr. '94 $15,126 $17,059
Apr. '95 $17,691 $20,038
Apr. '96 $22,110 $26,092
Apr. '97 $25,412 $32,650
Apr. '98 $34,373 $46,059
Apr. '99 $37,658 $56,114

Chart assumes $10,000 invested on April 30, 1989, a 5.75% front-end sales charge
and reinvestment of all distributions. Performance for other Fund classes will
vary due to differing charges and expenses. Effective November 2, 1998, the
maximum sales charge was raised from 4.75% to 5.75% for investments less than
$50,000. Past performance does not guarantee future results.

GROWTH STOCK FUND PERFORMANCE
- -------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1999

Lifetime Ten Years Five Years One Year
- -------------------------------------------------------------------------------
Class A (Est. 8/1/85)
Excluding Sales Charge +16.33% +14.69% +20.01% +9.56%
Including Sales Charge +15.83% +14.01% +18.59% +3.26%
- -------------------------------------------------------------------------------
Class B (Est. 9/8/95)
Excluding Sales Charge +19.34% +8.72%
Including Sales Charge +18.82% +3.72%
- -------------------------------------------------------------------------------
Class C (Est. 10/21/95)
Excluding Sales Charge +18.60% +8.72%
Including Sales Charge +18.60% +7.72%

Expense limitations were in effect for all classes for the periods shown above.
Performance would have been lower if the limitation were not in effect.

The average annual total return for the lifetime period, and annual return for
the one-year period ended for Growth Stock Fund's Institutional Class (Est.
8/29/97), which is available without sales or asset-based distribution charges
only to certain eligible institutional accounts, were +16.40% and +9.79%,
respectively.
<PAGE>

Financial Statements

VOYAGUER MUTUAL FUNDS III, INC. - AGGRESSIVE GROWTH FUND
STATEMENT OF NET ASSETS
APRIL 30, 1999

- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 88.89%
BANKING, FINANCE & INSURANCE - 19.61%
Ambac Financial Group ................................ 105,500 $6,369,562
Capital One Financial ................................ 55,000 9,552,813
Citigroup ............................................ 130,000 9,782,500
Federal Home Loan .................................... 100,000 6,275,000
First American (Tennessee) ........................... 151,000 5,860,688
MBIA ................................................. 50,000 3,359,375
MBNA ................................................. 160,000 4,510,000
Paine Webber Group ................................... 75,000 3,520,313
Toronto Dominion Bank ................................ 140,000 7,481,250
-----------
56,711,501
-----------
BUILDINGS & MATERIALS - 0.58%
*Comfort Systems USA .................................. 106,200 1,672,650
-----------
1,672,650
-----------
CABLE, MEDIA & PUBLISHING - 8.16%
*CBS .................................................. 175,000 7,973,438
*Chancellor Media - Class A ........................... 58,700 3,219,328
*Clear Channel Communications ......................... 30,000 2,085,000
*Consolidated Graphics ................................ 125,000 5,328,125
TCA Cable TV ......................................... 100,000 4,981,250
-----------
23,587,141
-----------
CAPITAL GOODS - 2.58%
*Mettler-Toledo International ......................... 285,500 7,458,688
-----------
7,458,688
-----------
COMPUTERS & TECHNOLOGY - 21.74%
*America Online ....................................... 25,000 3,568,750
*BMC Software ......................................... 50,000 2,151,563
*Cisco Systems ........................................ 30,000 3,422,813
*Citrix Systems ....................................... 80,000 3,402,500
*Concord Communications ............................... 68,300 3,064,963
*FORE Systems ......................................... 311,400 10,490,288
*Informatica .......................................... 22,000 624,250
International Business Machines ...................... 25,000 5,229,688
*Intuit ............................................... 30,000 2,581,875
*Ivillage ............................................. 27,500 2,179,375
*Legato Systems ....................................... 120,000 4,863,750
*Network Appliance .................................... 106,000 5,336,438
Nortel Networks ...................................... 36,000 2,454,750
*Onemain.com .......................................... 50,000 1,585,938
*Peregrine Systems .................................... 175,000 3,948,438
*Platinum technology .................................. 110,000 2,808,438
*Teradyne ............................................. 35,600 1,679,875
*Veritas Software ..................................... 48,500 3,455,625
-----------
62,849,317
-----------
CONSUMER PRODUCTS - 3.46%
*Gemstar International Group Limited .................. 95,000 9,995,781
-----------
9,995,781
-----------
<PAGE>

for growth of capital 11

- --------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
ELECTRONICS & ELECTRICAL EQUIPMENT - 7.88%
*Applied Materials .................................... 68,500 $3,671,172
*Applied Micro Circuits ............................... 49,000 2,613,844
*Micrel ............................................... 100,000 5,900,000
Motorola ............................................. 62,000 4,967,750
Texas Instruments .................................... 55,000 5,616,875
------------
22,769,641
------------
ENVIRONMENTAL SERVICES - 2.13%
*Republic Services - Class A .......................... 300,000 6,168,750
------------
6,168,750
------------
LEISURE, LODGING & ENTERTAINMENT - 6.27%
*Bally Total Fitness Holdings ......................... 60,000 1,455,000
*Extended Stay America ................................ 216,300 2,271,150
*Outback Steakhouse ................................... 220,500 7,924,219
*Papa John's International ............................ 114,600 4,605,488
Royal Caribbean Cruises .............................. 50,900 1,880,119
------------
18,135,976
------------
RETAIL - 12.43%
*American Eagle Outfitters ............................ 72,000 5,388,750
*Bed Bath & Beyond .................................... 45,000 1,608,750
*Children's Place ..................................... 40,000 1,447,500
*Cost Plus ............................................ 143,600 5,052,925
Home Depot ........................................... 101,800 6,101,638
Intimate Brands ...................................... 105,600 5,280,000
*Linens `n Things ..................................... 100,000 4,575,000
*Staples .............................................. 187,000 5,615,844
*Tuesday Morning ...................................... 45,000 880,316
------------
35,950,723
------------
TELECOMMUNICATIONS - 3.15%
*American Tower - Class A ............................. 255,000 5,402,813
*MCI Worldcom ......................................... 45,000 3,697,031
------------
9,099,844
------------
TEXTILES, APPAREL & FURNITURE - 0.90%
Nike ................................................. 42,000 2,611,861
------------
2,611,861
------------
Total Common Stock (cost $213,218,486) ................ 257,011,873
------------

PRINCIPAL
AMOUNT
------------
FEDERAL AGENCY (DISCOUNT NOTES) - 12.74%
Federal Home Loan Bank
4.76% 5/26/99 ...................................... $3,760,000 3,747,571
Federal Home Loan Mortgage Corporation
4.75% 5/14/99 ...................................... 6,675,000 6,663,650
Federal Home Loan Mortgage Corporation
4.75% 6/4/99 ....................................... 17,180,000 17,103,561

<PAGE>

12 for growth of capital

AGGRESSIVE GROWTH FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------------
FEDERAL AGENCY (DISCOUNT NOTES)
(CONTINUED)
Federal Home Loan Mortgage Corporation
4.76% 5/13/99 ..................................... $894,000 $ 892,581
Federal Home Loan Mortgage Corporation
5.70% 5/26/99 ..................................... 5,750,000 5,731,233
Federal Home Loan Mortgage Corporation
5.74% 5/17/99 ..................................... 2,700,000 2,694,350
------------
Total Federal Agency (cost $36,832,946) .............. 36,832,946
------------

TOTAL MARKET VALUE OF SECURITIES - 101.63%
(cost $250,051,432) ........................................... $293,844,819
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (1.63%) ........ (4,708,797)
------------
NET ASSETS APPLICABLE TO 11,359,963 SHARES ($0.01 PAR
VALUE) OUTSTANDING - 100.00% .................................. $289,136,022
============

NET ASSET VALUE - AGGRESSIVE GROWTH FUND A CLASS
($135,865,143 / 5,242,870 SHARES) .................................. $25.91
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND B CLASS
($103,299,488 / 4,133,364 SHARES) .................................. $24.99
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND C CLASS
($32,234,746 / 1,303,157 SHARES) ................................... $24.74
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND INSTITUTIONAL CLASS
($17,736,645 / 680,572 SHARES) ..................................... $26.06
======
COMPONENTS OF NET ASSETS AT APRIL 30,1999:
Common stock, $0.01 par value, 10,000,000,000 shares authorized
to the Fund with 1,000,000,000 shares allocated to the
Aggressive Growth Fund A Class, 1,000,000,000 shares allocated
to the Aggressive Growth Fund B Class, 1,000,000,000 shares
allocated to the Aggressive Growth Fund C Class, and
1,000,000,000 shares allocated to the Aggressive Growth Fund
Institutional Class ............................................ $235,305,338
Accumulated net realized gain on investments .................... 10,037,297
Net unrealized appreciation of investments ...................... 43,793,387
------------
Total net assets ................................................ $289,136,022
============
- -------------
Top 10 stock holdings, representing 28.81% of net assets, are printed in bold.

*Non-income producing security for the year ended April 30, 1999.

NET ASSET VALUE AND OFFERING PRICE PER SHARE -
AGGRESSIVE GROWTH FUND
Net asset value A Class (A) ............................................ $25.91
Sales charge (5.75% of offering price or 6.10% of the
amount invested per share) (B) ...................................... 1.58
------
Offering price ......................................................... $27.49
======
- ------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $50,000 or
more.

See accompanying notes

<PAGE>

VOYAGEUR MUTUAL FUNDS III, INC. -
GROWTH STOCK FUND
STATEMENT OF NET ASSETS
APRIL 30, 1999

- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
---------------------------------------------
COMMON STOCK - 92.16%
AUTOMOBILES & AUTO PARTS - 3.49%
Genuine Parts ............................................ 62,000 $1,860,000
-----------
1,860,000
-----------
BANKING, FINANCE & INSURANCE - 7.49%
KeyCorp ................................................... 62,000 1,918,125
SouthTrust ................................................ 52,000 2,071,875
-----------
3,990,000
-----------
CABLE, MEDIA & PUBLISHING - 3.45%
Gannett ................................................... 26,000 1,841,125
-----------
1,841,125
-----------
CHEMICALS - 4.40%
Sigma-Aldrich ............................................. 72,000 2,344,500
-----------
2,344,500
-----------
COMPUTERS & TECHNOLOGY - 8.45%
Automatic Data Processing ................................. 48,000 2,136,000
Hewlett-Packard ........................................... 30,000 2,366,250
-----------
4,502,250
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 3.44%
Intel ..................................................... 30,000 1,834,688
-----------
1,834,688
-----------
ENERGY - 9.99%
Royal Dutch Petroleum ..................................... 45,000 2,640,937
Shell Transport & Trading - ADR ........................... 59,000 2,680,812
-----------
5,321,749
-----------
FOOD, BEVERAGE & TOBACCO - 19.26%
Anheuser Busch ............................................ 31,000 2,266,875
ConAgra ................................................... 80,000 1,990,000
Philip Morris ............................................. 58,000 2,033,625
Sysco ..................................................... 70,000 2,078,125
UST ....................................................... 68,000 1,895,500
-----------
10,264,125
-----------
HEALTHCARE & PHARMACEUTICALS - 9.25%
Abbott Laboratories ....................................... 37,000 1,792,188
Merck & Company ........................................... 24,000 1,686,000
Schering-Plough ........................................... 30,000 1,449,375
-----------
4,927,563
-----------
INDUSTRIAL MACHINERY - 4.14%
Grainger (W.W.) ........................................... 44,000 2,208,250
-----------
2,208,250
-----------
PACKAGING & CONTAINERS - 7.86%
Bemis ..................................................... 58,000 2,030,000
Illinois Tool Works ....................................... 28,000 2,156,000
------------
4,186,000
------------
RETAIL - 10.94%
Albertson's ............................................... 34,000 1,751,000
Sherwin-Williams .......................................... 72,000 2,241,000
Wal-Mart Stores ........................................... 40,000 1,840,000
------------
5,832,000
------------
Total Common Stock (cost $32,859,405) ..................... 49,112,250
------------

<PAGE>

GROWTH STOCK FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-------------------------------------------
SHORT-TERM INVESTMENTS - 5.05%
Norwest Advantage Treasury Fund ...................... 2,691,513 $2,691,513
------------
Total Short-Term Investments
(cost $2,691,513) ................................. 2,691,513
------------

TOTAL MARKET VALUE OF SECURITIES - 97.21%
(cost $35,550,918) ............................................ $51,803,763
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 2.79% .......... 1,485,883
------------
NET ASSETS APPLICABLE TO 1,642,452 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% ....................... $53,289,646
============

NET ASSET VALUE - GROWTH STOCK FUND A CLASS
($45,341,940 / 1,393,208 SHARES) .................................... $32.55
======
NET ASSET VALUE - GROWTH STOCK FUND B CLASS
($4,456,551 / 140,997 SHARES) ....................................... $31.61
======
NET ASSET VALUE - GROWTH STOCK FUND C CLASS
($1,631,387 / 51,620 SHARES) ........................................ $31.60
======
NET ASSET VALUE - GROWTH STOCK FUND INSTITUTIONAL CLASS
($1,859,768 / 56,627 SHARES) ........................................ $32.84
======

COMPONENTS OF NET ASSETS AT APRIL 30, 1999:
Common stock, $0.01 par value, 10,000,000,000 shares authorized
to the Fund with 1,000,000,000 shares allocated to the Growth
Stock Fund A Class, 1,000,000,000 shares allocated to the
Growth Stock Fund B Class, 1,000,000,000 shares allocated to the
Growth Stock Fund C Class, and 1,000,000,000 shares
allocated to the Growth Stock Fund Institutional Class ......... $33,307,179
Undistributed net investment income ............................... 87,104
Accumulated net realized gain on investments ...................... 3,642,518
Net unrealized appreciation of investments ........................ 16,252,845
------------
Total net assets .................................................. $53,289,646
============
- -------------
Top 10 stock holdings, representing 43.38% of net assets, are printed in bold.

ADR - American Depository Receipt

NET ASSET VALUE AND OFFERING PRICE PER SHARE -
GROWTH STOCK FUND
Net asset value A Class (A) ........................................... $32.55
Sales charge (5.75% of offering price or 6.11% of the
amount invested per share) (B) ..................................... 1.99
------
Offering price ........................................................ $34.54
======
- ------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $50,000 or
more.

See accompanying notes
<PAGE>

for growth of capital 13

VOYAGEUR MUTUAL FUNDS III, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED APRIL 30, 1999

- --------------------------------------------------------------------------------
AGGRESSIVE GROWTH
GROWTH STOCK
FUND FUND
-------------------------------------------
INVESTMENT INCOME:
Interest ............................................ $722,954 $ 66,846
Dividends ........................................... 218,777 814,959
----------- -----------
941,731 881,805
----------- -----------

EXPENSES:
Management fees ..................................... 1,266,260 459,855
Distribution expense ................................ 759,669 142,054
Dividend disbursing and transfer agent fees
and expenses ..................................... 640,608 116,992
Registration fees ................................... 126,511 33,089
Reports and statements to shareholders .............. 61,920 13,843
Professional fees ................................... 51,666 10,293
Accounting and administration ....................... 50,462 16,635
Custodian fees ...................................... 36,835 --
Taxes (other than taxes on income) .................. 34,125 5,030
Directors' fees ..................................... 5,858 1,502
Other ............................................... 131,475 8,941
----------- -----------
3,165,389 808,234
Less expenses waived or absorbed .................... (520,747) (12,464)
Less expenses paid indirectly ....................... (3,057) (1,069)
----------- -----------
Total operating expenses ............................ 2,641,585 794,701
Interest expense .................................... 5,333 --
----------- -----------
Total expenses ...................................... 2,646,918 794,701
----------- -----------

NET INVESTMENT INCOME (LOSS) ........................ (1,705,187) 87,104
----------- -----------

NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments .................... 12,710,334 5,370,799
Net change in unrealized appreciation/depreciation
of investments ................................... 37,910,776 (1,052,537)
----------- -----------

NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .................................... 50,621,110 4,318,262
----------- -----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................... $48,915,923 $4,405,366
=========== ===========

See accompanying notes

<PAGE>

14 for growth of capital

VOYAGEUR MUTUAL FUNDS III, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

AGGRESSIVE GROWTH FUND GROWTH STOCK FUND
--------------------------- ---------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
4/30/99 4/30/98 4/30/99 4/30/98
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) ......................................... $ (1,705,187) $ (139,791) $ 87,104 $ 17,857
Net realized gain on investments ..................................... 12,710,334 2,274,789 5,370,799 3,217,814
Net change in unrealized appreciation/depreciation of investments .... 37,910,776 5,806,360 (1,052,537) 8,777,754
------------ ----------- ----------- -----------
Net increase in net assets resulting from operations ................. 48,915,923 7,941,358 4,405,366 12,013,425
------------ ----------- ----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ........................................................... -- -- -- (147,399)
B Class ........................................................... -- -- -- --
C Class ........................................................... -- -- -- --
Institutional Class ............................................... -- -- -- --

Net realized gain on investments:
A Class ........................................................... (759,414) (1,197,178) (2,792,065) (2,640,914)
B Class ........................................................... (495,438) (302,775) (171,753) (83,774)
C Class ........................................................... (167,011) (121,344) (85,614) (64,003)
Institutional Class ............................................... (52,267) (75,818) (52,950) (1)
------------ ----------- ----------- -----------
(1,474,130) (1,697,115) (3,102,382) (2,936,091)
------------ ----------- ----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................................... 107,585,600 31,439,897 10,358,617 8,650,407
B Class ........................................................... 76,339,435 15,982,839 2,905,442 739,470
C Class ........................................................... 24,808,778 5,425,395 701,988 294,728
Institutional Class ............................................... 20,041,360 3,291,956 1,220,007 828,889
Net asset value of shares issued upon reinvestment of distributions
from net investment income and net realized gain on investments:
A Class ........................................................... 729,836 1,077,585 2,653,394 2,660,669
B Class ........................................................... 469,818 283,448 154,045 78,013
C Class ........................................................... 160,488 116,190 77,672 63,798
Institutional Class ............................................... 52,267 75,818 52,950 1
------------ ----------- ----------- -----------
230,187,582 57,693,128 18,124,115 13,315,975
------------ ----------- ----------- -----------
Cost of shares repurchased:
A Class ........................................................... (28,350,998) (10,065,175) (9,955,086) (12,995,728)
B Class ........................................................... (6,688,642) (881,725) (637,390) (385,466)
C Class ........................................................... (3,619,801) (403,052) (293,684) (148,914)
Institutional Class ............................................... (6,581,557) (1,099,659) (260,902) (2,000)
----------- --------- ------- -------
(45,240,998) (12,449,611) (11,147,062) (13,532,108)
------------ ----------- ----------- -----------
Increase (decrease) in net assets derived from
capital share transactions ........................................... 184,946,584 45,243,517 6,977,053 (216,133)
------------ ----------- ----------- -----------

NET INCREASE IN NET ASSETS ........................................... 232,388,377 51,487,760 8,280,037 8,861,201

NET ASSETS:
Beginning of year .................................................... 56,747,645 5,259,885 45,009,609 36,148,408
------------ ----------- ----------- -----------
End of year .......................................................... $289,136,022 $56,747,645 $53,289,646 $45,009,609
============ =========== =========== ===========
</TABLE>
See accompanying notes
<PAGE>

for growth of capital 15

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND A CLASS
-----------------------------------------------------------------------
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 5/16/94(1) TO
4/30/99 4/30/98(2) 4/30/97 4/30/96 4/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $20.570 $11.770 $13.080 $10.400 $10.000

Income (loss) from investment operations:
Net investment loss ................................... (0.203) (0.052) (0.180) (0.100) (0.090)
Net realized and unrealized gain on investments ....... 5.910 11.127 0.960 3.270 0.490
-------- ------- ------ ------ ------
Total from investment operations ...................... 5.707 11.075 0.780 3.170 0.400
-------- ------- ------ ------ ------

Less distributions:
Distributions from net realized gain
on investments ...................................... (0.367) (2.275) (2.090) (0.400) --
Return of capital ..................................... -- -- -- (0.090) --
-------- ------- ------ ------ ------
Total distributions ................................... (0.367) (2.275) (2.090) (0.490) --
-------- ------- ------ ------ ------
Net asset value, end of period ........................... $25.910 $20.570 $11.770 $13.080 $10.400
======== ======= ====== ====== ======

Total return(3) .......................................... 28.43% 98.60% 4.34% 31.02% 4.00%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $135,865 $31,926 $4,944 $4,334 $2,189
Ratio of expenses to average net assets ............... 1.67% 1.75% 1.84% 2.01% 1.74%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ..... 2.06% 2.29% 2.65% 2.74% 2.97%
Ratio of net investment loss to average
net assets .......................................... (0.95%) (0.69%) (1.38%) (1.00%) (1.21%)
Ratio of net investment loss to average
net assets prior to expense limitation and
expenses paid indirectly ............................ (1.34%) (1.23%) (2.19%) (1.73%) (2.44%)
Portfolio turnover .................................... 313% 356% 180% 166% 88%
</TABLE>

<PAGE>

(Restubbed from previous page)

<TABLE>
<CAPTION>
AGGRESSIVE GROWTH FUND B CLASS
---------------------------------------------------------
PERIOD FROM
YEAR ENDED YEAR ENDED YEAR ENDED 4/16/96(1) TO
4/30/99 4/30/98(2) 4/30/97 4/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................. $ 20.000 $11.570 $13.060 $11.910

Income (loss) from investment operations:
Net investment loss ............................... (0.350) (0.061) (0.210) (0.010)
Net realized and unrealized gain on investments ... 5.707 10.766 0.810 1.160
------- ------- ------- -------
Total from investment operations .................. 5.357 10.705 0.600 1.150
------- ------- ------- -------

Less distributions:
Distributions from net realized gain
on investments .................................. (0.367) (2.275) (2.090) --
Return of capital ................................. -- -- -- --
------- ------- ------- -------
Total distributions ............................... (0.367) (2.275) (2.090) --
-------- -------- -------- --------
Net asset value, end of period ....................... $24.990 $20.000 $11.570 $13.060
======= ======= ======= =======

Total return(3) ...................................... 27.41% 97.12% 2.84% 9.66%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ........... $103,299 $16,539 $95 $0
Ratio of expenses to average net assets ........... 2.42% 2.50% 2.57% 1.86%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly . 2.81% 3.04% 3.37% 1.86%
Ratio of net investment loss to average
net assets ...................................... (1.70%) (1.44%) (1.97%) (1.39%)
Ratio of net investment loss to average
net assets prior to expense limitation and
expenses paid indirectly ........................ (2.09%) (1.98%) (2.77%) (1.39%)
Portfolio turnover ................................ 313% 356% 180% 166%

</TABLE>
- ----------------------
1 Date of initial public offering; ratios have been annualized and total return
has not been annualized.
2 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
3 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset value
and does not reflect the impact of a sales charge.

See accompanying notes

<PAGE>
16 for growth of capital

Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>

Aggressive Growth Fund
C Class
--------------------------------------------------------------
Period from
Year Ended Year Ended Year Ended Year Ended 5/20/94(1)
4/30/99 4/30/98(2) 4/30/97 4/30/96 to 4/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $19.800 $11.470 $12.880 $10.330 $10.000

Income (loss) from investment operations:
Net investment loss .................................... (0.345) (0.071) (0.230) (0.210) (0.160)
Net realized and unrealized gain on investments ........ 5.652 10.676 0.910 3.250 0.490
------- ------- ------- ------- -------
Total from investment operations ....................... 5.307 10.605 0.680 3.040 0.330
------- ------- ------- ------- -------

Less distributions:
Distributions from net realized gain on investments .... (0.367) (2.275) (2.090) (0.400) --
Return of capital ...................................... -- -- -- (0.090) --
------- ------- ------- ------- -------
Total distributions .................................... (0.367) (2.275) (2.090) (0.490) --
------- ------- ------- ------- -------
Net asset value, end of period ............................ $24.740 $19.800 $11.470 $12.880 $10.330
======= ======= ======= ======= =======

Total return(3)............................................ 27.45% 96.99% 3.58% 29.96% 3.30%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $32,235 $5,892 $222 $150 $128
Ratio of expenses to average net assets 2.42% 2.50% 2.62% 2.77% 2.40%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.81% 3.04% 3.43% 3.50% 3.50%
Ratio of net investment loss to average net assets ..... (1.70%) (1.44%) (2.02%) (1.73%) (1.80%)
Ratio of net investment loss to average net assets
prior to expense limitation and expenses paid
indirectly ........................................... (2.09%) (1.98%) (2.83%) (2.46%) (2.90%)
Portfolio turnover ..................................... 313% 356% 180% 166% 88%
</TABLE>
<PAGE>

(RESTUBBED TABLE)
<TABLE>
<CAPTION>

Aggressive Growth Fund
Institutional Class
-------------------------------------
Period from
Year Ended 8/29/97(1) to
4/30/99 4/30/982(2)
<S> <C> <C>
Net asset value, beginning of period ...................... $20.640 $17.150

Income (loss) from investment operations:
Net investment loss .................................... (0.155) (0.019)
Net realized and unrealized gain on investments ........ 5.942 5.539
------- -------
Total from investment operations ....................... 5.787 5.520
------- -------
Less distributions:
Distributions from net realized gain on investments .... (0.367) (2.030)
Return of capital ...................................... -- --
------- -------
Total distributions .................................... (0.367) (2.030)
------- -------
Net asset value, end of period ............................ $26.060 $20.640
======= =======

Total return(3) ........................................... 28.73% 34.68%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $17,737 $2,391
Ratio of expenses to average net assets ................... 1.42% 1.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.81% 2.04%
Ratio of net investment loss to average net assets ..... (0.70%) (0.44%)
Ratio of net investment loss to average net assets
prior to expense limitation and expenses paid
indirectly ........................................... (1.09%) (0.98%)
Portfolio turnover ..................................... 313% 356%
</TABLE>
- ----------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.

See accompanying notes
<PAGE>

for growth of capital 17

Growth Stock Fund A Class
------------------------------------------------------------

Year Ended Year Ended Year Ended Year Ended Year Ended
4/30/99 4/30/98(2) 4/30/97 4/30/96 4/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $31.830 $25.340 $23.660 $19.910 $17.510

Income (loss) from investment operations:
Net investment income (loss) ........................... 0.075 0.029 0.160 0.080 0.150
Net realized and unrealized gain on investments ........ 2.790 8.591 3.360 4.820 2.770
------- ------- ------- ------- -------
Total from investment operations ....................... 2.865 8.620 3.520 4.900 2.920
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... -- (0.113) (0.080) (0.110) (0.130)
Distributions from net realized gain on investments .... (2.145) (2.017) (1.760) (1.040) (0.390)
------- ------- ------- ------- -------
Total dividends and distributions ...................... (2.145) (2.130) (1.840) (1.150) (0.520)
------- ------- ------- ------- -------
Net asset value, end of period ............................ $32.550 $31.830 $25.340 $23.660 $19.910
======= ======= ======= ======= =======

Total return(3)............................................ 9.56% 35.27% 15.27% 25.00% 17.04%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $45,342 $41,196 $34,255 $28,956 $23,651
Ratio of expenses to average net assets ................ 1.68% 1.75% 1.72% 1.78% 1.90%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.71% 1.82% 1.72% 1.87% 1.99%
Ratio of net investment income (loss) to average
net assets ........................................... 0.25% 0.07% 0.68% 0.36% 0.75%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................. 0.22% -- 0.68% 0.27% 0.66%
Portfolio turnover ..................................... 36% 9% 29% 37% 22%
</TABLE>
<PAGE>

(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Growth Stock Fund B Class
-------------------------------------------------
Period from
Year Ended Year Ended Year Ended 9/8/95(1) to
4/30/99 4/30/98(2) 4/30/97 4/30/96(1)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $31.200 $24.930 $23.390 $21.640

Income (loss) from investment operations:
Net investment income (loss) ........................... (0.149) (0.165) -- 0.060
Net realized and unrealized gain on investments ........ 2.704 8.425 3.300 2.960
------- ------- ------- -------
Total from investment operations ....................... 2.555 8.260 3.300 3.020
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... -- -- -- (0.230)
Distributions from net realized gain on investments .... (2.145) (1.990) (1.760) (1.040)
------- ------- ------- -------
Total dividends and distributions ...................... (2.145) (1.990) (1.760) (1.270)
------- ------- ------- -------
Net asset value, end of period ............................ $31.610 $31.200 $24.930 $23.390
======= ======= ======= =======

Total return(3)............................................ 8.72% 34.29% 14.50% 14.37%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $4,457 $1,903 $1,182 $454
Ratio of expenses to average net assets ................ 2.43% 2.50% 2.47% 2.41%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.46% 2.57% 2.47% 2.50%
Ratio of net investment income (loss) to average
net assets ........................................... (0.50%) (0.67%) (0.01%) (0.62%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................. (0.53%) (0.74%) (0.01%) (0.71%)
Portfolio turnover ..................................... 36% 9% 29% 37%
</TABLE>
- ----------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact Of a sales charge.

See accompanying notes
<PAGE>

18 for growth of capital

Growth Stock Fund Growth Stock Fund
C Class Institutional Class
---------------------------------------------- -------------------------
Period from Period from
Year Ended Year Ended Year Ended 10/21/95(1) Year Ended 8/29/97(1)
4/30/99 4/30/98(2) 4/30/97 to 4/30/96 4/30/99 to 4/30/98(2)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $31.190 $24.930 $23.430 $22.610 $32.030 $27.520

Income from investment operations:
Net investment income (loss) ........................... (0.149) (0.192) 0.070 0.110 0.153 0.047
Net realized and unrealized gain on investments ........ 2.704 8.442 3.220 2.000 2.802 5.803
------- ------- ------- ------- ------- -------
Total from investment operations ....................... 2.555 8.250 3.290 2.110 2.955 5.850
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................... -- -- (0.030) (0.250) -- (0.040)
Distributions from net realized gain on investments .... (2.145) (1.990) (1.760) (1.040) (2.145) (1.300)
------- ------- ------- ------- ------- -------
Total dividends and distributions ...................... (2.145) (1.990) (1.790) (1.290) (2.145) (1.340)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................ $31.600 $31.190 $24.930 $23.430 $32.840 $32.030
======= ======= ======= ======= ======= =======
Total return(3) ........................................... 8.72% 34.25% 14.42% 9.72% 9.79% 21.41%

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,631 $1,112 $712 $104 $1,860 $799
Ratio of expenses to average net assets ................... 2.43% 2.50% 2.47% 2.35% 1.43% 1.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.46% 2.57% 2.47% 2.43% 1.46% 1.57%
Ratio of net investment income (loss) to average
net assets ........................................... (0.50%) (0.67%) 0.14% (0.65%) 0.50% 0.33%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... (0.53%) (0.74%) 0.14% (0.73%) 0.47% 0.26%
Portfolio turnover ..................................... 36% 9% 29% 37% 36% 9%
</TABLE>

- ----------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.

See accompanying notes
<PAGE>

for growth of capital 19

VOYAGEUR MUTUAL FUNDS III, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999
- --------------------------------------------------------------------------------
Voyageur Mutual Funds III, Inc. is registered as a Delaware Business Trust and
offers three series: Aggressive Growth Fund, Growth Stock Fund and Tax-Efficient
Equity Fund. These financial statements and the related notes pertain to
Aggressive Growth Fund and Growth Stock Fund (each referred to as a "Fund" or
collectively as the "Funds"). The Funds are registered as diversified open-end
investment companies under the Investment Company Act of 1940, as amended. Each
Fund offers four classes of shares. The A Class carries a front end sales charge
of 5.75%. The B Class carries a back end sales charge. The C Class carries a
level load deferred sales charge and the Institutional Class has no sales
charge.

The Aggressive Growth Fund's objective is to seek long-term capital appreciation
by investing primarily in equity securities of companies which the Fund manager
believes have the potential for high earnings growth. The Growth Stock Fund's
objective is to seek long-term capital appreciation through investment in equity
securities diversified through companies and industries.

1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.

Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices.

Federal Income Taxes - Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.

Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
each Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Each Fund declares and pays dividends from net
investment income and capital gains, if any, semi-annually.

Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $3,057 for Aggressive Growth Fund and
$1,069 for Growth Stock Fund for the period ended April 30, 1999. The "soft
dollar" reimbursement is combined as expenses paid indirectly in the Statement
of Operations.
<PAGE>

2. Investment Management and Other Transactions with Affiliates
Effective April 1, 1999, for Aggressive Growth Fund and April 15, 1999, for
Growth Stock Fund, the Funds pay DMC, the Investment Manager of the Funds, an
annual fee which is calculated daily on the net assets, less fees paid to
unaffiliated directors, as follows:

Aggressive Growth Fund Growth Stock Fund
- --------------------------------- -------------------------------------
On the first $500 million ...0.75% On the first $500 million ......0.65%
On the next $500 million ....0.70% On the next $500 million .......0.60%
On the next $1,500 million ..0.65% On the next $1,500 million .....0.55%
Over $2,500 million .........0.60% Over $2,500 million ............0.50%

Prior to April 1, 1999, and April 15, 1999, respectively, both Funds paid DMC an
annual fee of 1.00% of average net assets.

DMC has entered into a sub-advisory agreement with Voyageur Asset Management
Inc. with respect to the management of the Growth Stock Fund. The sub-advisor
receives a sub-advisory fee from DMC for their services. The Growth Stock Fund
does not pay any fees to the sub-advisor.

DMC has elected to waive that portion of the management fee and reimburse each
Fund to the extent that annual operating expenses exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and distribution expenses, exceed
1.50% of each Funds average daily net assets through June 30, 1999.

The Funds have engaged DSC, an affiliate of DMC, to provide dividend disbursing,
transfer agent and accounting services. Each Fund pays DSC a monthly fee based
on the number of shareholder accounts, shareholder transactions and average net
assets, subject to certain minimums.

At April 30, 1999, the Funds had payables to affiliates as follows:

Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Investment Management fee payable to DMC ............. $105,746 $51,106
Dividend disbursing, transfer agent fees, accounting
fees and other expenses payable to DSC ............ 91,631 13,389
Other expenses payable to DMC and affiliates ......... 41,398 10,606

Pursuant to the Distribution Agreement, the Funds pay DDLP, the Distributor and
an affiliate of DMC, an annual fee not to exceed 0.25% of the average daily net
assets of the A Class and 1.00% of the average daily net assets of the B and C
Classes. No distribution expenses are paid by the Institutional Class.

For the year ended April 30, 1999, DDLP earned commissions on sales of the A
Class shares for each Fund as follows:

Aggressive Growth
Growth Fund Stock Fund
----------- ----------
$237,356 $12,075

Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Funds.

<PAGE>

20 for growth of capital

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. Investments
During the year ended April 30, 1999, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments for each Funds as follows:

Aggressive Growth
Growth Fund Stock Fund
------------ ----------
Purchases ....................................... $540,099,204 $17,545,094
Sales ........................................... 386,118,564 15,862,112

At April 30, 1999, the Funds aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund were
as follows:

Aggressive Growth
Growth Fund Stock Fund
------------ ----------
Cost of investments .............................. $250,787,333 $35,550,918
============ ===========
Aggregate unrealized appreciation ................ $ 46,954,991 $16,748,543
Aggregate unrealized depreciation ................ (3,897,505) (495,698)
------------ -----------
Net unrealized appreciation ...................... $ 43,057,486 $16,252,845
============ ===========

4. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Aggressive Growth Fund Growth Stock Fund
----------------------- -----------------------
Year Ended Year Ended Year Ended Year Ended
4/30/99 4/30/98 4/30/99 4/30/98
<S> <C> <C> <C> <C>
Shares sold:
A Class ....................................... 5,016,591 1,644,240 334,779 289,387
B Class ....................................... 3,616,171 849,561 96,281 24,380
C Class ....................................... 1,179,159 292,993 23,019 10,214
Institutional Class ........................... 875,879 170,504 38,269 24,996

Shares issued upon reinvestment of distributions from
net investment income and net realized gain on
investments:
A Class ....................................... 38,251 62,779 86,732 90,233
B Class ....................................... 25,354 16,905 5,158 2,689
C Class ....................................... 8,751 7,005 2,601 2,198
Institutional Class ........................... 2,729 4,398 1,718 --
---------- ---------- ---------- ----------
10,762,885 3,048,385 588,557 444,097
---------- ---------- ---------- ----------
Shares repurchased:
A Class ....................................... (1,364,098) (575,071) (322,631) (437,377)
B Class ....................................... (334,921) (47,894) (21,442) (13,459)
C Class ....................................... (182,318) (21,760) (9,654) (5,301)
Institutional Class ........................... (313,880) (59,058) (8,295) (61)
---------- ---------- ---------- ----------
(2,195,217) (703,783) (362,022) (456,198)
---------- ---------- ---------- ----------

Net increase (decrease) .......................... 8,567,668 2,344,602 226,535 (12,101)
========== ========== ========== ==========
</TABLE>

5. Lines of Credit
The committed lines of credit are $500,000 and $1,600,000 for the Aggressive
Growth Fund and the Growth Stock Fund, respectively. No amounts were outstanding
at April 30, 1999, or at any time during the fiscal year.
<PAGE>

for growth of capital 21

VOYAGEUR MUTUAL FUNDS III, INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
VOYAGEUR MUTUAL FUNDS III, INC. - AGGRESSIVE GROWTH FUND
VOYAGEUR MUTUAL FUNDS III, INC. - GROWTH STOCK FUND

We have audited the accompanying statements of net assets of Aggressive Growth
Fund and Growth Stock Fund (the "Funds") as of April 30, 1999, and the related
statements of operations for the year then ended and the statements of changes
in net assets and the financial highlights for each of the two years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the periods presented through April 30,
1997 were audited by other auditors whose report dated June 13, 1997 expressed
an unqualified opinion on those financial highlights.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of April 30, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at April 30, 1999, the results of their operations for
the year then ended, and the changes in their net assets and their financial
highlights for each of the two years in the period then ended, in conformity
with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP
------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
June 4, 1999
<PAGE>

22 for growth of capital

PROXY RESULTS (UNAUDITED)
- --------------------------------------------------------------------------------
For the fiscal year ended April 30, 1999, Voyageur Mutual Funds III, Inc.'s
Aggressive Growth Fund and Growth Stock Fund's shareholders voted on the
following proposals at the annual meeting of shareholders on March 17, 1999. The
description of each proposal and number of shares voted are as follows.

1. To elect the Fund's Board of Directors:

For the Aggressive Growth Fund:

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------
Jeffrey J. Nick ....................... 8,940,412 -- 663,888
Walter P. Babich ...................... 8,960,306 -- 643,994
Anthony D. Knerr ...................... 8,967,847 -- 636,453
Ann R. Leven .......................... 8,969,376 -- 634,924
Thomas F. Madison ..................... 8,969,376 -- 634,924
Charles E. Peck ....................... 8,969,376 -- 634,924
Wayne A. Stork ........................ 8,969,958 -- 634,342
Jan L. Yeomans ........................ 8,969,958 -- 634,342

For the Growth Stock Fund:

Jeffrey J. Nick ....................... 8,940,412 -- 663,888
Walter P. Babich ...................... 8,960,306 -- 643,994
Anthony D. Knerr ...................... 8,967,847 -- 636,453
Ann R. Leven .......................... 8,969,376 -- 634,924
Thomas F. Madison ..................... 8,969,376 -- 634,924
Charles E. Peck ....................... 8,969,376 -- 634,924
Wayne A. Stork ........................ 8,969,958 -- 634,342
Jan L. Yeomans ........................ 8,969,958 -- 634,342

2. To approve the reclassification of the Fund's investment objective from
fundamental to non-fundamental.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,752,790 115,045 132,490
Growth Stock Fund ..................... 401,966 21,335 27,017

3. To approve standardized fundamental investment restrictions for the Fund
(proposal involves separate votes on seven sub-proposals 4A-4G).

3A. To adopt a new fundamental investment restriction concerning concentration
of the Fund's investments in the same industry.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,782,522 84,084 133,716
Growth Stock Fund ..................... 405,620 16,828 27,871

3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,753,894 108,558 137,872
Growth Stock Fund ..................... 399,563 19,817 30,938

3C. To adopt a new fundamental investment restriction concerning underwriting.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,763,846 78,770 157,708
Growth Stock Fund ..................... 403,321 15,455 31,541
<PAGE>

for growth of capital 23

PROXY RESULTS (CONTINUED)
- --------------------------------------------------------------------------------

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,754,839 111,328 134,159
Growth Stock Fund ..................... 400,748 19,435 30,136

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,760,575 102,834 136,915
Growth Stock Fund ..................... 395,498 22,291 32,528

3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,756,769 100,103 143,452
Growth Stock Fund ..................... 400,954 17,272 32,092

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 1,744,077 110,157 146,092
Growth Stock Fund ..................... 392,166 25,861 32,291

4. To approve a new investment management agreement with Delaware Management
Company for the Fund.
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 4,642,069 115,431 197,938
Growth Stock Fund ..................... 601,773 22,254 31,222

5. To approve a new sub-advisor agreement with Voyageur Asset Management, Inc.
for the Voyageur Mutual Funds III, Inc.'s Growth Stock Fund.
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ N/A N/A N/A
Growth Stock Fund ..................... 606,078 15,912 33,260

6. To ratify the selection of Ernst & Young LLP, as the independent auditors for
Voyageur Mutual Funds III, Inc.
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 8,888,723 172,794 542,769
Growth Stock Fund ..................... 8,888,723 172,794 542,769

7. To approve the restructuring of the Voyageur Mutual Funds III, Inc. from a
Maryland Corporation into a Delaware Business Trust.

Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------

Aggressive Growth Fund ................ 7,075,853 172,794 542,769
Growth Stock Fund 7,075,853 172,794 542,769
<PAGE>

DELAWARE INVESTMENTS FAMILY OF FUNDS

FOR GROWTH OF CAPITAL FOR CURRENT INCOME
Aggressive Growth Fund Delchester Fund
Trend Fund High-Yield Opportunities Fund
DelCap Fund Strategic Income Fund
Small Cap Value Fund Corporate Bond Fund
U.S. Growth Fund Extended Duration Bond Fund
Growth Stock Fund U.S. Government Fund
Tax-Efficient Equity Fund U.S. Government Securities Fund
Social Awareness Fund Limited-Term Government Fund

FOR TOTAL RETURN FOR TAX-EXEMPT INCOME
Blue Chip Fund National High Yield Municipal Bond Fund
Devon Fund Tax-Free USA Fund
Growth and Income Fund Tax-Free Insured Fund
Decatur Equity Income Fund Tax-Free USA Intermediate Fund
REIT Fund State Tax-Free Funds*
Delaware Balanced Fund
MONEY MARKET FUNDS
FOR INTERNATIONAL DIVERSIFICATION Delaware Cash Reserve
Emerging Markets Fund Tax-Free Money Fund
New Pacific Fund
Overseas Equity Fund ASSET ALLOCATION FUNDS
International Equity Fund Growth Portfolio
Global Equity Fund Balanced Portfolio
Global Bond Fund Income Portfolio

* Available for the following states:
Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri,
North Dakota, New Jersey, New Mexico, New
York, Ohio, Oregon, Pennsylvania, Utah,
Washington, Wisconsin. Insured and
intermediate bond funds are available in
selected states.
funds
Complete information on any fund offered
by Delaware Investments can be found in
each fund's current prospectus.
Prospectuses for all funds offered by
Delaware Investments are available from
your financial adviser. Please read the
prospectus carefully before you invest or
send money.

<PAGE>

THIS ANNUAL REPORT IS FOR THE INFORMATION OF AGGRESSIVE GROWTH FUND AND GROWTH
STOCK FUND
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Aggressive Growth Fund and Growth Stock
Fund and the Delaware Investments Performance Update for the most recently
completed calendar quarter. The prospectus sets forth details about charges,
expenses, investment objectives and operating policies of each Fund. You should
read the prospectus carefully before you invest or send money. The figures in
this report represent past results which are not a guarantee of future results.
The return and principal value of an investment in each Fund will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.

Board of Directors Affiliated Officers

WAYNE A. STORK GEORGE M. CHAMBERLAIN, JR.
Chairman Senior Vice President, Secretary
Delaware Investments Family of Funds and General Counsel
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, BRUCE D. BARTON
Inc. President and Chief Executive Officer
King of Prussia, PA Delaware Distributors, L.P.
Philadelphia, PA
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA

JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA

ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY

ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC

THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN

CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA

JAN L. YEOMANS
Vice President and Treasurer
3M Corporation directors
St. Paul, Minnesota & officers
- --------------------------------------------------------------------------------
INVESTMENT MANAGER SHAREHOLDER SERVICING,
Delaware Management Company DIVIDEND DISBURSING
Philadelphia, Pennsylvania AND TRANSFER AGENT
Delaware Service Company, Inc.
INTERNATIONAL AFFILIATE Philadelphia, Pennsylvania
Delaware International Advisers Ltd.
London, England 1818 Market Street
Philadelphia, PA 19103-3682
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
<PAGE>

When used with prospective investors, this report must be preceded or

accompanied by a current Aggressive Growth Fund and Growth Stock Fund

Prospectus and the Delaware Investments Performance Update for the most recently

completed calendar quarter. For a prospectus of any other mutual fund from

Delaware Investments, contact your financial adviser or Delaware Investments.

For Shareholders
1.800.523.1918

For Securities Dealers
1.800.362.7500

For Financial Institutions
Representatives Only
1.800.659.2265

www.delawareinvestments.com

Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Funds are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Funds are not bank or credit union deposits.

DELAWARE
INVESTMENTS
=====================
Philadelphia o London

Printed in the USA
on recycled paper

(1785)
AR-316[4/99]PPL6/99